NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER
Electronically Filed Intermediate Court of Appeals CAAP-XX-XXXXXXX 16-SEP-2024 09:13 AM Dkt. 552 MO
NO. CAAP-XX-XXXXXXX
IN THE INTERMEDIATE COURT OF APPEALS
OF THE STATE OF HAWAI‘I
MATTHEW LOPRESTI, JULIA LOPRESTI, ROBERT JOHNSON, REGENA JOHNSON, KYLE MCKEE, MARITES MCKEE, EMIL GOCONG, LIZ GOCONG, KENNETH TYLER, on Behalf of Themselves and All Others Similarly Situated, Plaintiffs-Appellees/Cross-Appellants, v. HASEKO (HAWAII), INC.; HASEKO (EWA), INC.; HASEKO DEVELOPMENT, INC.; HASEKO HOMES, INC.; HASEKO INVESTMENTS, INC.; HASEKO REALTY (HAWAII), INC.; HOAKALEI; HOAKALEI CORPORATION; HOAKALEI DEVELOPMENT, LLC; HOAKALEI RESIDENTIAL, LLC, Defendants-Appellants/Cross-Appellees, and DOE DEFENDANTS 1-10, Defendants
APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT (CASE NO. 1CC131001995)
MEMORANDUM OPINION (By: Wadsworth, Presiding Judge, McCullen and Guidry, JJ.)
Defendants-Appellants/Cross-Appellees Haseko (Hawaii),
Inc., Haseko (Ewa), Inc., Haseko Development, Inc., Haseko NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER Homes, Inc., Haseko Investments, Inc., Haseko Realty (Hawaii),
Inc., Hoakalei Corporation, Hoakalei Development, LLC, and
Hoakalei Residential, LLC1 appeal from the Final Judgment
(Judgment), entered on September 27, 2019, by the Circuit Court
of the First Circuit (circuit court). Haseko also challenges
the circuit court's January 29, 2018 Findings of Fact (FOF),
Conclusions of Law (COL), and Order Regarding Counts 1 and 9
(Equitable Trial Court Order).2
Plaintiffs-Appellees/Cross-Appellants Matthew
Lopresti, Julia Lopresti, Robert Johnson, Regena Johnson, Kyle
McKee, Marites McKee, Emil Gocong, Liz Gocong, and Kenneth Tyler
(collectively Plaintiffs) cross-appeal from the Judgment.
Plaintiffs also challenge the circuit court's:
(1) October 18, 2016 Order Regarding Plaintiffs'
Motion for (1) Entry of the Order Granting
Defendants Haseko (Hawaii), Inc., Haseko (Ewa),
1 We refer to these nine Haseko entities collectively as Haseko. Of these nine entities, as further explained below, the following four were found by the jury to have engaged in unfair or deceptive acts or practices (UDAP) under Hawaii Revised Statutes (HRS) § 480-2: Haseko (Hawaii), Inc., Haseko (Ewa), Inc., Haseko Development, Inc., and Haseko Realty (Hawaii), Inc. We refer to these four entities collectively as the Haseko Defendants or Defendants.
2 The Honorable Karen T. Nakasone (the Equitable Trial Court) presided over Plaintiffs' equitable claims, and entered the Equitable Trial Court Order. The Honorable Gary W.B. Chang (the Legal Trial Court) presided over Plaintiffs' legal claims and entered the Judgment, as well as the orders referred to below as the Legal Trial Court Order and the Order Denying New Legal Trial.
2 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER Inc., Haseko Development, Inc., Haseko Homes,
Inc., Haseko Investments, Inc., Haseko Realty
(Hawaii), Inc., Hoakalei Corporation, Hoakalei
Development, LLC, and Hoakalei Residential, LLC's
Renewed Motion for Judgment as a Matter of law,
Filed October 8, 2015 and in the Alternative
Clarification Regarding the Same; and (2) Entry
on Class Plaintiffs' Motion for New Trial on
Damages or, in the Alternative, to Reconsider
Decision Granting Defendants' Motion for Judgment
as a Matter of Law Filed October 9, 2015, Filed
September 29, 2016 (Legal Trial Court Order);
(2) February 2, 2017 Order Denying "Class Plaintiffs'
Motion for New Trial on Damages, or in the
Alternative, to Reconsider Decision Granting
Defendants' Renewed Motion for Judgment as a
Matter of Law Filed October 9, 2015" Filed on
February 26, 2016 (Order Denying New Legal
Trial); and
(3) the Equitable Trial Court Order.
Haseko raises nine points of error on appeal;
Plaintiffs raise five points of error on cross-appeal. Upon
careful review of the record and relevant legal authorities, and
3 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER having given due consideration to the arguments advanced and the
issues raised by the parties, we resolve these points of error
as follows.
I. Background
This appeal concerns a large multi-purpose real estate
project in the ʻEwa District of Oʻahu (the Project), which had
included, as part of its original master plan, the construction
of a man-made marina (the Marina). Haseko was the Project's
developer. After years of representing that the Marina would be
constructed as the "focal point" and "main benefit" of the
Project, Haseko, in July 2011, abandoned the Marina as too
expensive to construct, and decided to construct a lagoon
instead.
In July 2013, nearly 3,000 Project homeowners filed a
class action complaint, seeking damages from Haseko for changing
the master plan of the Project by substituting the Marina for a
lagoon. Plaintiffs set forth nine claims in their operative
First Amended Complaint. Two claims were dismissed before
trial.3 The remaining claims were addressed through bifurcated
judicial proceedings.
3 In August 2015, the Legal Trial Court also granted judgment as a matter of law "as to all class members that were not the original purchasers of homes in Ocean Pointe/Hoakalei[,]" thus limiting the class to the original purchasers of property within the Haseko development.
4 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER The Legal Trial Court presided over a nine-week jury
trial on Plaintiffs' UDAP, Bad Faith, and Negligent
Misrepresentation claims. In September 2015, the jury returned
a special verdict in favor of Plaintiffs on the UDAP claim only,
finding that the Haseko defendants had engaged in UDAP
violations under HRS § 480-2. The jury awarded Plaintiffs
$1,300 per home in special damages, and $20 million in punitive
damages.
The Legal Trial Court set aside both the jury's
punitive and special damages awards. With respect to special
damages, the Legal Trial Court explained that, "the measure of
damage was inappropriate and was not consistent with applicable
legal principles that govern the determination of damages in an
unfair and deceptive claim practice case."
The Legal Trial Court then recused itself from the
Plaintiffs' remaining Condominium Property Act (CPA), Promissory
Estoppel, Estoppel, and Unjust Enrichment claims. In November
2015, these claims were reassigned to the Equitable Trial Court,
pursuant to Hawaiʻi Rules of Civil Procedure (HRCP) Rule 63.
In September 2016, the Equitable Trial Court dismissed
Plaintiffs' estoppel claims. The Equitable Trial Court ruled in
favor of Plaintiffs on the CPA claim, by granting Plaintiffs the
right to rescind their purchase agreement with Haseko. The
5 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER Equitable Trial Court also ruled in favor of Plaintiffs on the
unjust enrichment claim, awarding a sum of $20 million to be
divided among Plaintiffs who elected not to rescind.
The Legal Trial Court entered Judgment, and the
parties timely appealed.
II. Standards of Review
We review questions of law and conclusions of law de
novo under the right/wrong standard. Hawaiʻi Gov't Emps. Ass'n,
AFSCME Local 152, AFL-CIO v. Lingle, 124 Hawaiʻi 197, 202,
239 P.3d 1, 6 (2010). We review findings of fact for clear
error. Dan v. State, 76 Hawaiʻi 423, 428, 879 P.2d 528, 533
(1994).
We review the application of equity for abuse of
discretion. In re Est. of Campbell, 106 Hawaiʻi 453, 461, 106
P.3d 1096, 1104 (2005).
III. Discussion
A. Plaintiffs' Damages Remedy for the UDAP Violation
Following trial, the Legal Trial Court jury found that
the Haseko Defendants violated the UDAP statute. Pursuant to
HRS § 480-2, "[u]nfair methods of competition and unfair or
deceptive acts or practices in the conduct of any trade or
commerce are unlawful." To prevail on a UDAP claim, a plaintiff
consumer must prove "(1) either that the defendant violated the 6 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER UDAP statute (or that its actions are deemed to violate the UDAP
statute by another statute), (2) that the consumer was injured
as a result of the violation, and (3) the amount of damages
sustained as a result of the UDAP violation." Lima v. Deutsche
Bank Nat'l Tr. Co., 149 Hawaiʻi 457, 464-65, 494 P.3d 1190, 1197-
98 (2021) (citations omitted).
In cases involving fraud or deceit, the measure of
damages "is usually confined to either the out-of-pocket loss or
the benefit of the bargain." Zanakis–Pico v. Cutter Dodge,
Inc., 98 Hawaiʻi 309, 320, 47 P.3d 1222, 1233 (2002) (cleaned
up). Under the out-of-pocket rule, "the damages are the
difference between the actual value of the property received and
the price paid for the property, along with any special damages
naturally and proximately caused by the fraud prior to its
discovery, including expenses incurred in mitigating the
damages." Lima, 149 Hawaiʻi at 469, 494 P.3d at 1202 (cleaned
up). In contrast, the benefit-of-the-bargain rule "allows the
[recipient of the fraud or deceit] to recover the difference
between the value of the property received and the value to
plaintiff that the property would have had if the representation
had been true." Santiago v. Tanaka, 137 Hawaiʻi 137, 159, 366
P.3d 612, 634 (2016) (quoting B.F. Goodrich Co. v. Mesabi Tire
Co., 430 N.W.2d 180, 182 (Minn. 1988)). 7 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER Plaintiffs raise five points of error on cross-appeal,
contending that the Legal Trial Court erred in: (1) instructing
the jury on the proper measure of damages for a UDAP violation;
(2) granting judgment in favor of the Haseko Defendants when
instead it should have ordered a new trial on damages; (3)
denying Plaintiffs relief based on HRS § 480-12, despite the
jury's finding that the Haseko Defendants breached HRS Chapter
480; (4) refusing "Plaintiffs' Proposed Jury Instruction 21,"
and later finding that Plaintiffs introduced no evidence that
they suffered monetary damages; and (5) allowing evidence of a
subsequent increase in property values, including the testimony
of Haseko's appraisal expert James Hallstrom (Hallstrom).
We address each of these points, some of which raise
overlapping issues, below.
1. Jury Instructions Regarding the Measure of Damages
In their first and fourth points of error, Plaintiffs
contend, respectively, that the Legal Trial Court improperly
instructed the jury on the measure of special damages and erred
in refusing "Plaintiffs' Proposed Jury Instruction 21."
At trial, the Legal Trial Court instructed the jury on
the measure of damages for a UDAP violation as follows (the UDAP
damages instructions):
If you find that plaintiffs have prevailed against a defendant on the claim of unfair or deceptive acts or 8 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER practices, you must decide the amount that will reasonably and fairly compensate plaintiffs for the actual economic loss legally caused by the unfair or deceptive acts or practices.
In determining the amount of special damages, if any, to award plaintiffs, you may consider whether plaintiffs are entitled to the benefit of the bargain they believed they purchased, contracted for, or invested in. The benefit of the bargain is the difference, if any, between the value of the personal investment represented to plaintiffs, and the value of such personal investment received by plaintiffs. You may award plaintiffs special damages only if the value of what was received is less than the value of what was represented.
In awarding damages, if any, for unfair or deceptive acts or practices, you must not include any amount:
1. For non-economic losses, such as emotional distress; or
2. To punish or make an example of a defendant by awarding punitive damages; or
3. For legal fees or costs of this lawsuit.
The Legal Trial Court further instructed the jury: "Damages are
established at the time of the sale, and those damages are not
later reduced by a subsequent beneficial event."4
The jury returned a special verdict in which it found
that the four Haseko Defendants violated the UDAP statute. The
jury awarded Plaintiffs $1,300 per home in special damages, and
$20 million in punitive damages.5
4 Notably, in their closing, Plaintiffs argued to the jury that Hallstrom's testimony was "100 percent worthless[,]" because "you have a jury instruction that says you measure the damages at the time of sale."
5 Plaintiffs confirm in their Cross-Appeal Opening Brief that they do not challenge the Legal Trial Court's decision to set aside the jury's punitive damages award.
9 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER Plaintiffs argue that the UDAP damages instructions
"failed to properly instruct the [j]ury on how to properly
determine and calculate damages via the [t]hree [s]tep process
mandated by Davis [v. Wholesale Motors, Inc., 86 Hawaiʻi 405, 949
P.2d 1026, (App. 1997)]." In Davis, a plaintiff consumer sued a
car dealer for damages caused by the dealer's unfair and
deceptive trade practice in selling a car to him. This court
decided that under HRS § 480-13, "the plaintiff should be placed
in the position he or she would have held had he or she not been
defrauded[,]" but should not be permitted to reap a benefit
received from the defendant dealer under the parties' contract.
Id. at 421, 949 P.2d at 1042. We thus upheld an award of
damages to the defendant dealer on its counterclaim – which we
referred to as a "setoff award" – for the rental value of the
car and repair costs for damage done to the car while the
plaintiff possessed it. Id. We further held that any damages
sustained by the plaintiff should be trebled under HRS § 480-
13(b)(1) before the award to the defendant was applied. Id.
Based on Davis, Plaintiffs contend that "the legally
correct standard for measure of damages in this case should have
been to take the value reflected in each sales contract, treble
that number as required by the statute, and then any offset
applied against the trebled number." Plaintiffs argue that
10 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER "[t]he value of the residence received . . . may serve as an
offset to the [damages] to be trebled first per Davis . . . ."
Plaintiffs appear to challenge the UDAP damages instructions for
failing to reflect their interpretation of this "three-step
process."
Initially, we note that the court's UDAP damages
instructions essentially track Hawaiʻi Civil Jury Instructions
(HCJI) 19.6, 19.7, and 19.8, though the order of Instruction
Nos. 19.7 and 19.8 is reversed. In particular, HCJI Instruction
No. 19.86 sets out the benefit-of-the-bargain rule for measuring
UDAP damages, consistent with the rulings in Ellis, Zanakis-
Pico, and Santiago, supra. This is the measure of damages that
Plaintiffs appeared to advocate in trial memoranda submitted to
the Legal Trial Court. Indeed, on September 1, 2015, Plaintiffs
filed their own proposed jury instructions based on HCJI
Instructions 19.6, 19.7, and 19.8, in the same order as the
6 HCJI Instruction No. 19.8 states:
DAMAGES – BENEFIT OF THE BARGAIN
In determining the amount, if any, to award plaintiff(s), you may consider whether plaintiff(s) is/are entitled to the benefit of the bargain he/she/they believed he/she/they purchased, contracted for, or invested in. The benefit of the bargain is the difference, if any, between the value of the goods, services, or investment represented to plaintiff(s), and the value of such goods, services, or investment delivered to plaintiff(s).
(Footnote omitted.)
11 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER court later adopted. Although the court modified certain
phrases in HCJI Instruction No. 19.8 to fit the facts of the
case, and added an explanatory sentence, Plaintiffs do not
challenge any of these minor modifications.7 Rather, they fault
the court for not giving a Davis-based instruction that they
themselves did not propose, and which they do not specify on
appeal.
At bottom, Plaintiffs fundamentally misread Hawaiʻi
law, including Davis, on the measure of UDAP damages in cases
involving fraud or deceit. Plaintiffs were required to prove
that they sustained damages as a result of Haseko's fraud-based
UDAP violation. To the extent they relied on the benefit-of-
the-bargain measure, they were required to establish the
difference, if any, between the value of the personal investment
represented to plaintiffs, i.e., the value of their homes as
represented with the promised marina, and the value of what they
received, which was essentially the promise of a home without a
marina, measured at the time of the purchase/sale. See Ellis,
7 As to HCJI Instruction No. 19.8, the court replaced the phrase "goods, services, or investment" with the phrase "personal investment[,]" and replaced the phrase "delivered to plaintiff(s)" with "received by plaintiffs[,]" consistent with the facts of the case. The court also added the explanatory sentence, "You may award plaintiffs special damages only if the value of what was received is less than the value of what was represented[,]" which follows as a matter of logic from the benefit-of-the- bargain measure set out in the preceding sentence.
12 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER 51 Haw. at 53, 451 P.2d at 820 (measuring fraud damages at the
time of the transaction). Plaintiffs established the value of
their homes as represented based on the purchase prices they
paid. See infra. We address the evidence presented on the
value of what Plaintiffs received in section 2, below. For
purposes of the UDAP damages instructions, however, the value of
what Plaintiffs received, measured at the time of purchase, is
not a set-off to their benefit-of-the-bargain damages; it is the
subtrahend in the calculation of their damages. Trebling the
prices paid for the homes without subtracting the value received
by Plaintiffs would result in an unjust windfall to Plaintiffs
that finds no support in Davis.
Plaintiffs also argue that the Legal Trial Court erred
in refusing "Plaintiffs' Proposed Jury Instruction 21." They do
not quote the proposed instruction or identify where it is in
the voluminous record. See Hawaiʻi Rules of Appellate Procedure
(HRAP) Rule 28(b)(4). Plaintiffs drop a brief footnote to their
point of error suggesting that the proposed instruction was
based on the Restatement (Second) of Torts § 549 (Am. L. Inst.
1965), but do not otherwise present any argument as to how the
court erred in declining to adopt the proposed instruction.
Their point is thus deemed waived. See HRAP Rule 28(b)(7). In
any event, the UDAP damages instructions given by the court
13 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER adequately covered the principles derived from the applicable
statute and case law.8 On this record, we cannot conclude that
"when read and considered as a whole, the [UDAP damages]
instructions given [were] prejudicially insufficient, erroneous,
inconsistent, or misleading." Moyle v. Y & Y Hyup Shin, Corp.,
118 Hawaiʻi 385, 391, 191 P.3d 1062, 1068 (2008) (cleaned up).
2. Evidence Supporting Plaintiffs' Damages
In their second point of error, Plaintiffs contend
that the Legal Trial Court erred in granting judgment in favor
of the Haseko Defendants rather than ordering a new trial on
damages. Relatedly, in their fourth point of error, Plaintiffs
contend in part that the Legal Trial Court erred in finding that
Plaintiffs introduced no evidence of their damages.
On October 28, 2015, the Legal Trial Court set aside
the jury's damages award, stating with regard to special damages
that "the court does not know what the jury intended to do by
8 Plaintiffs' footnote suggests that the proposed instruction included an out-of-pocket measure of damages. They do not explain, however, why they could not have argued for an award of such damages based on the court's jury instruction to "decide the amount that will reasonably and fairly compensate plaintiffs for the actual economic loss legally caused by the unfair or deceptive acts or practices." Moreover, Plaintiffs do not explain how damages based on an out-of-pocket measure would have differed from those based on a benefit-of-the-bargain measure under the facts of this case. Here, by definition, the price paid for the homes (for purposes of the out-of-pocket measure) was the value of the homes as represented (for purposes of the benefit-of-the-bargain measure), and the value of what was received was the same (for purposes of both measures).
14 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER way of their award, but in looking at how the evidence was
structured, the only evidence the court really focussed [sic] on
in terms of proof of compensatory damages was this contention
that the damages should be measured by the cost of constructing
the marina."9 Ultimately, the Legal Trial Court determined that
there was insufficient evidence of Plaintiffs' damages to
support the jury's verdict. The Legal Trial Court granted the
Haseko Defendants' motion to set aside the verdict, and entered
judgment on the UDAP claim in favor of the Haseko Defendants.
We conclude that the Legal Trial Court erred in
setting aside the jury verdict and entering judgment in favor of
the Haseko Defendants on Plaintiffs' UDAP claim, which was
contrary to the jury's ultimate determination that the Haseko
9 The court elaborated:
. . . So the court does not conclude that a cost analysis would be an appropriate measure of damage.
The alternative theory, which was actually the primary theory of the plaintiff, is that the plaintiff's benefit of the bargain damages takes the form of the cost to construct the marina in the case at bar. . . .
. . . And when the case law talks about benefit of the bargain, the law contemplates that the wrongful conduct in question affected the value of the property, and if plaintiffs suffered a harm, that the value of the property would decrease after the wrongful conduct. Therefore, the measure of damage is expressed in terms of the difference between the value of the property as represented with a marina, minus the value of the property that was actually received with lagoon. So it requires evidence of the value of these properties, the plaintiffs' properties with a marina minus the value with a lagoon. And there was simply no such evidence in the record.
15 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER Defendants violated the UDAP statute. Plaintiffs presented
sufficient evidence for the jury to award them UDAP damages
based on a benefit-of-the-bargain measure. First, Plaintiffs
presented evidence of the value of their homes as represented
with the proposed marina based on the purchase prices they paid,
as reflected in their sales contracts. Second, Plaintiffs
presented evidence of the value of what they received at or near
the time of purchase. Specifically, Plaintiffs showed at trial
that Haseko spent approximately $60 million on Marina
construction from 2008 to 2010.10 Lawrence Chang, Haseko's
controller, confirmed that this $60-million expenditure "came
from homeowners for the marina and the cost was allocated into
. . . each home[.]" Plaintiffs thus presented evidence
sufficient to show that revenue from each home sale –
approximately $20,000 per home ($60 million/3,000 Plaintiffs) –
was allocated to cover the costs of building the Marina. This
evidence supported Plaintiffs' argument that they overpaid for
10 Relatedly, the Equitable Trial Court's later FOFs and COLs were based in part on the court's review of "the trial record of the 2015 jury trial[.]" The Haseko Defendants do not dispute the court's finding in FOF 22 that: "From 2008 to 2010, Haseko spent approximately $60 million on Marina construction, dredging and lining the basin with armor stone. These $60 million in Marina costs were allocated into every home that was sold. At the time the $60 million was spent on Marina construction, from 2008 to 2010, Haseko intended to complete the Marina." Unchallenged findings of fact are binding on appeal. Okada Trucking Co. v. Bd. of Water Supply, 97 Hawaiʻi 450, 458, 40 P.3d 73, 81 (2002).
16 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER their homes by approximately $20,000 per home, i.e., that the
value of what they received at the time of purchase was $20,000
less than the purchase price. Plaintiffs were not required to
prove their UDAP damages with scientific precision; reasonable
certainty was sufficient. See Lima, 149 Hawaiʻi at 467, 494 P.3d
at 1200. Although the jury was free to reject all or any part
of the evidence Plaintiffs presented on their damages – and it
appears the jury rejected much of it – the evidence was
sufficient to support a UDAP damages award based on a benefit-
of-the-bargain measure. The Legal Trial Court erred in
concluding otherwise.
In setting aside the jury's damages award, the Legal
Trial Court also appears to have imposed an incorrect legal
standard on Plaintiffs. Specifically, the court ruled that
Plaintiffs had failed to show "the difference between the value
of the property as represented with a marina, minus the value of
the property that was actually received with lagoon." (Emphasis
added.) The proper measure of benefit-of-the-bargain damages,
however, was the difference between the value of Plaintiffs'
homes as represented with a marina, and the value of what they
received at the time of the purchase (which, again, was
essentially the promise of a house without a marina). See
Ellis, 51 Haw. at 53, 451 P.2d at 820.
17 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER Accordingly, the Legal Trial Court erred in setting
aside the jury verdict and entering judgment in favor of the
Haseko Defendants on Plaintiffs' UDAP claim.
3. Rescission
In their third point of error, Plaintiffs contend that
the Legal Trial Court erred in denying relief to Plaintiffs
pursuant to HRS § 480-12, and "simply should have voided the
sales contracts following HRS [§] 480-12's plain mandate that
contracts entered into on the basis of UDAP violations are
simply void."
The plain language of HRS § 480-12 states that "[a]ny
contract or agreement in violation of this chapter is void and
is not enforceable at law or in equity." On this basis, "a
transaction that includes an unfair or deceptive business
practice is typically null and subject to rescission." Sakal v.
Ass'n of Apartment Owners of Hawaiian Monarch, 148 Hawaiʻi 1, 8
n.11, 466 P.3d 399, 406 n.11 (2020).
Here, the record reflects that the Plaintiffs
contracted with only one of the nine Haseko entities - Hoakalei
Residential, LLC – when they purchased homes. Neither the Legal
Trial Court jury, nor the Equitable Trial Court, found that
Hoakalei Residential, LLC was liable for violating HRS § 480-12.
Notably, the Legal Trial Court jury further found, in its
18 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER special verdict, that none of the nine Haseko entities acted as
the alter ego of any other Haseko entity. Plaintiffs have not
advanced any cognizable legal theory permitting the rescission
of sales contracts that were entered into with a party that was
not found liable for a UDAP violation.
The Legal Trial Court did not err in concluding that
Plaintiffs are not entitled to elect the rescission of their
home sales contracts pursuant to HRS § 480-12.
4. Evidence of Subsequent Increases in Property Values
Plaintiffs contend that the Legal Trial Court erred in
allowing evidence, including Hallstrom's testimony, regarding "a
subsequent increase in property values[,]" i.e., subsequent to
the home sales at issue. Plaintiffs argue that Hallstrom's
testimony conflicts with Hawaiʻi law that fraud damages are
measured "at the time of the misrepresentation."11 (Emphasis
omitted.)
Initially, we note that Plaintiffs do not quote the
specific evidence and testimony that they challenge or otherwise
identify where it is in the voluminous record. See HRAP
Rule 28(b)(4). In any event, Plaintiffs' broad-brush argument
11 More precisely, in fraud or deceit cases, damages are measured at the time of the transaction. See Ellis, 51 Haw. at 53, 451 P.2d at 820.
19 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER challenging Hallstrom's testimony fails to show his testimony
was inadmissible.
Hallstrom essentially testified, based on the studies
he conducted, that property values in the Haseko development did
not drop when Haseko announced in late 2011 that a lagoon rather
than a marina would be built. Although this testimony did not
relate directly to the measure of Plaintiffs' damages at the
time of their home purchases,12 it was at least relevant to
whether Plaintiffs were injured as a result of Haseko's alleged
misrepresentations that a marina would be built, or alleged
failure to disclose that it would not be built. Relevant
evidence is "evidence having any tendency to make the existence
of any fact that is of consequence to the determination of the
action more probable or less probable than it would be without
the evidence." Hawaii Rules of Evidence Rule 401. Evidence
that home prices did not drop in the Haseko development when
Haseko announced that a lagoon rather than a marina would be
built, tended to show – or at least Haseko was free to argue
that such evidence tended to show – that the announced switch
had no effect on the market prices of those homes. Such
12 Indeed, Plaintiffs argued to the jury in closing that Hallstrom's testimony was "100 percent worthless, [because] you have a jury instruction that says you measure the damages at the time of the sale."
20 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER evidence would, in turn, demonstrate that the prices of those
homes were not artificially inflated by the false promises of a
marina, and that Plaintiffs therefore suffered no loss as a
result of the false promises. Indeed, if prices had dropped (or
had not kept pace with increasing values of comparable
properties) after the announcement, Plaintiffs would have been
able to present such evidence in support of their argument that
the false promises caused their loss.13 Because Hallstrom's
testimony was relevant to an issue "of consequence to the
determination of the action," i.e., whether Plaintiffs were
injured as a result of the alleged UDAP violation, the Legal
Trial Court did not err in admitting the evidence.
5. Summary
For the reasons discussed above, the Legal Trial Court
did not err in instructing the jury on the measure of damages
for a UDAP violation, in not ordering rescission of Plaintiffs'
sales contracts based on HRS § 480-12, and in allowing
13 In a somewhat related context, class action plaintiffs in securities fraud cases frequently point to the price drop of a stock after bad corporate news is announced as evidence that the failure to disclose relevant facts months or even years earlier, when the facts first became known, artificially inflated the price of the stock, and that the eventual price drop is evidence of "loss causation," i.e., "that the defendant's deceptive conduct caused [the plaintiff investors'] claimed economic loss." In re Tesla, Inc. Sec. Litig., Case No. 18-cv-04865-EMC, 2022 WL 7374936, at *7 (N.D. Cal. Oct. 13, 2022) (quoting Lloyd v. CVB Fin. Corp., 811 F.3d 1200, 1209 (9th Cir. 2016), and citing numerous other Ninth Circuit "fraud-on-the market" cases).
21 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER Hallstrom's testimony. The Legal Trial Court did err in setting
aside the jury verdict, and entering judgment in favor of the
Haseko Defendants, on Plaintiffs' UDAP claim. On remand, the
jury's special damages award of $1,300 per home should be
reinstated and trebled pursuant to HRS § 480-13(b)(1) and (3),
and Plaintiffs should be permitted to seek all additional relief
available under these provisions.
B. Plaintiffs' Equitable Remedies
Haseko raises nine points of error on appeal, which
fall into two categories. First, Haseko contends that the
Equitable Trial Court erred in allowing Plaintiffs to rescind
their sales contracts under the CPA because: (1) the court's
rescission order was based on an erroneous finding that "[t]his
lawsuit concerns a marina that was included in the original
master plan for a 1,100-acre condominium regime . . . ." ; (2)
Plaintiffs were bound by their election to seek damages rather
than rescission; and (3) Plaintiffs' rescission claim was time-
barred pursuant to HRS § 514B-94(b). Second, Haseko contends
that the Equitable Trial Court erred in awarding $20 million on
Plaintiffs' unjust enrichment claim because: (1) the award was
based on the same erroneous finding quoted above; (2) as no
Plaintiff can rescind, none can claim an unjust enrichment
award; (3) Plaintiffs had an adequate remedy at law; (4) the
22 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER
Hawaiʻi Legislature did not provide an unjust enrichment remedy
for a UDAP violation; (5) the evidence did not support the Legal
Trial Court's conclusion that any enrichment was unjust; and (6)
Haseko's decision to switch to a lagoon caused Haseko to incur a
net loss, and thus did not enrich it.
1. Rescission Under the CPA
We conclude that Plaintiffs' claims for rescission
under the CPA are time-barred because HRS § 514B-94(b), which
governs claims brought under the CPA, is a statute of repose and
not a statute of limitations. We thus need not address Haseko's
remaining contentions challenging the Equitable Trial Court's
rescission order.
"A statute of repose 'bar[s] any suit that is brought
after a specified time since the defendant acted (such as by
designing or manufacturing a product), even if this period ends
before the plaintiff has suffered a resulting injury.'" Zyda v.
Four Seasons Hotels and Resorts, 371 F. Supp. 3d 803, 806 (D.
Haw. 2019) (quoting Black's Law Dictionary 1546 (9th ed. 2009).
HRS § 514B-94(b) states, in pertinent part, that "no action
shall be brought for the recovery of the purchase price after
two years from the date of the sale[.]" This language
definitively specifies the time for bringing a CPA action as
calculated "from the date of the sale." We find persuasive the
23 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER
District Court for the District of Hawaiʻi's analysis in Zyda
that the language in HRS § 514B-94(b) is similar, albeit not
identical, to the language in HRS §§ 657-5 and 657-7.3, which
the Hawaiʻi appellate courts have recognized as statutes of
repose. Id. at 806-10.
Here, Plaintiffs filed their complaint on July 17,
2013, which was more than two years after all of the named class
action Plaintiffs who owned condominiums within the Project
purchased their units. Plaintiffs' claim for rescission under
the CPA is time-barred pursuant to HRS § 514B-94(b).
2. Unjust Enrichment
a. Finding of Fact 2
Haseko contends that FOF 2 erroneously states: "This
lawsuit concerns a marina that was included in the master plan
for a 1,100-acre condominium regime . . . ." Haseko asserts
that "[t]he project is not a condominium property regime[,]" but
does not present any discernible argument explaining how FOF 2
affects, let alone undermines, the Equitable Trial Court's
unjust enrichment award. This point is therefore deemed waived.
See HRAP Rule 28(b)(7).
b. No Rescission, No Unjust Enrichment
Haseko contends that "because no homeowner may now
rescind, no homeowner may claim the unjust enrichment award."
24 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER This argument depends on Haseko's cramped and
inaccurate reading of the Equitable Trial Court Order. The
relevant portion states: "[F]or any Class member who does not
elect [rescission and] restitution of the full purchase price
plus interest as set forth above, i.e. Class members who wish to
continue living within the Ocean Pointe/Hoakalei, they are
awarded the remedy of unjust enrichment in the amount of their
pro rata share of $20,000,000." Thus, if a class member cannot
elect rescission because it is not legally available in these
circumstances, nothing in the Order prevents that class member
or any other class member who wishes to continue living within
Ocean Pointe/Hoakalei, from sharing in the Equitable Trial
Court's unjust enrichment award. Haseko's argument is without
merit.
c. Adequacy of Legal Remedy
Haseko contends that Plaintiffs were not entitled to
the equitable remedy of restitution on their unjust enrichment
claim because they had adequate legal remedies for their breach
of contract and UDAP claims.
"As to the question of when an equitable remedy may be
invoked, this court observes the principle, long-invoked in the
federal courts, that equity has always acted only when legal
25 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER
remedies were inadequate." Porter v. Hu, 116 Hawaiʻi 42, 55,
169 P.3d 994, 1007 (App. 2007) (cleaned up).
Here, Plaintiffs did not contract with any of the four
Haseko Defendants found liable for a UDAP violation. The only
contracts Plaintiffs had were with Hoakalei Residential, LLC.
Plaintiffs thus had no breach of contract remedy, or contract-
based UDAP remedy, against the Haseko Defendants.14 The
Equitable Trial Court did not err or otherwise abuse its
discretion in determining that "[n]o contracts exist between the
Haseko Defendants and Plaintiffs to bar relief through unjust
enrichment[,]" and that Plaintiffs' breach of contract remedies
were inadequate as to the Haseko Defendants. See id. at 56, 169
P.3d at 1008 ("the circuit court . . . imposed an equitable
remedy upon determining that the contract remedies available did
not adequately address Defendants' unjust enrichment (a matter
within the circuit court's discretion)").
Plaintiffs also lacked an adequate tort remedy. In
Porter, this court ruled:
Although the jury returned a verdict in [Plaintiffs'] favor and awarded tort damages, Plaintiffs contend the jury's award was insufficient to adequately compensate their losses as a result of Defendants' wrongful conduct. This court agrees with Plaintiffs and concludes that the mere
14 Relatedly, because Plaintiffs did not contract with any of the Haseko Defendants, none of those defendants are shielded by the rule that when an express contract exists between the parties concerning the same subject matter, equitable remedies are not available. Porter, 116 Hawaiʻi at 54, 169 P.3d at 1006. 26 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER availability of some figure of tort damages does not by itself preclude an award founded on unjust enrichment. As Palmer notes in his treatise on restitution, "[t]he objectives of the two remedies are different, however: in the damage action the plaintiff seeks to recover for the harm done to him, whereas in the restitution action he seeks to recover the gain acquired by the defendant through the wrongful act." 1 George E. Palmer, The Law of Restitution § 2.1, at 51 (1978). Although the tort and unjust enrichment claims are, in a sense, founded on the same wrongful conduct—the deprivation of Plaintiffs' books of business by Defendants—the remedies sought are sufficiently distinct, in this court's view, to exclude this case from the realm of "double recovery" situations.
We conclude, in light of the foregoing, the circuit court did not abuse its discretion in ruling that no adequate remedy at law existed and the equitable remedy of unjust enrichment was therefore appropriate.
Id. (emphases added).
Similarly, here, the jury returned a verdict in
Plaintiffs' favor and awarded tort-based UDAP damages, but
Plaintiffs contend that the jury's award did not provide an
adequate remedy. Based on the Equitable Trial Court's
unchallenged FOFs, we agree that the jury's verdict was
insufficient to adequately compensate Plaintiffs for their
losses – and the Haseko Defendants' unjust gains – as a result
of the Defendants' wrongful conduct. The Equitable Trial Court
determined that Plaintiffs "have shown the absence of an
adequate remedy at law[,]" based on the Legal Trial Court's
decision to set aside the jury's award of damages for "deceptive
UDAP conduct." However, the court also noted that the jury's
factual findings of wrongdoing by the Haseko Defendants were not
27 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER set aside, and recounted the details of that wrongdoing in the
court's own FOFs, none of which (except for FOFs 2 and 55) the
Haseko Defendants contest on appeal. The uncontested FOFs
support the conclusion that the jury's award of $1,300 per home
did not provide an adequate remedy, where Plaintiffs established
that the Haseko Defendants were unjustly enriched by their
wrongful conduct. As in Porter, "[a]lthough the [UDAP] and
unjust enrichment claims are, in a sense, founded on the same
wrongful conduct[,] . . . the remedies sought are sufficiently
distinct . . . to exclude this case from the realm of 'double
recovery' situations." Id.; see also id. at 58-59, 169 P.3d at
1010-11 ("the damages alleged to have resulted from the tort are
different in type and character from those arising under the
equitable principle of unjust enrichment."). Accordingly,
Plaintiffs established that they lacked an adequate remedy at
law, and the equitable remedy of unjust enrichment was therefore
appropriate.
d. Equitable Remedies Not Provided by the Legislature
Haseko contends that the legislature has provided
several remedies under the UDAP statute, but did not choose to
allow monetary damages based on unjust enrichment. Haseko
argues that the Equitable Trial Court therefore "had no
28 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER authority to add equitable remedies not allowed by the
Legislature."
Contrary to Haseko's contention, nothing in the
statutory language or history of HRS §§ 480–2 and –13 expresses
a legislative intent to make statutory remedies exclusive or to
otherwise preclude an unjust enrichment claim and related remedy
in appropriate circumstances. Cf. E. Star Inc., S.A. v. Union
Bldg. Materials Corp., 6 Haw. App. 125, 142, 712 P.2d 1148, 1159
(1985) (HRS §§ 480–2 and –13(a)(1) "do not supersede common law
fraud claims based on deception in the course of trade and
commerce").
e. Evidence of Unjust Enrichment
Haseko contends in its last two points of error that
the switch from marina to lagoon did not enrich Haseko, the
amount of the $20 million unjust enrichment award was clearly
erroneous, and any enrichment to Haseko was not unjust.
We note once again that the Haseko Defendants do not
contest, except for FOFs 2 and 55, the numerous, detailed FOFs
underlying the Equitable Trial Court's decision to award $20
million in restitution on Plaintiffs' unjust enrichment claim.
Moreover, upon review, the record contains substantial evidence
supporting FOF 55 and the Equitable Trial Court's mixed
conclusion of fact and law that the Haseko Defendants were
29 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER unjustly enriched in the amount of $20 million. This finding
and conclusion is not clearly erroneous, and in the
circumstances of this case, the Equitable Trial Court did not
abuse its discretion in awarding that amount in restitution to
Plaintiffs.
IV. Conclusion
For the reasons discussed above, we vacate the
Judgment, and we affirm in part and vacate in part the Legal
Trial Court Order, Equitable Trial Court Order, and Order
Denying New Legal Trial. We remand for further proceedings
consistent with this memorandum opinion.
DATED: Honolulu, Hawaiʻi, September 16, 2024.
On the briefs: /s/ Clyde J. Wadsworth Presiding Judge Steven K.S. Chung, for Defendants-Appellants/ /s/ Sonja M.P. McCullen Cross-Appellees. Associate Judge
Terrance M. Revere, /s/ Kimberly T. Guidry P. Kyle Smith, Associate Judge for Plaintiffs-Appellees/ Cross-Appellants.